Brand equity, risk and return in Latin America

Abstract

Purpose This study aims to compare the performance of stocks of companies with high brand equity with the stocks of other companies listed on the stock market of emerging countries of Latin America: Brazil, Chile, Colombia, Mexico and Peru. Design/methodology/approach The valuable brands (brands with high brand equity) considered were the most valuable Latin America brands according to the Millward Brown reports. Carhart four-factor model was used to analyze performance and the total sample included 732 stocks in the Latin American market collected at Economatica, monthly, for a period of 10 years. Findings The Valuable Brands Portfolio presents the lowest investment risk, suggesting that stocks of companies with valuable brands ensure lower risk investment to shareholders in these emerging markets. Originality/value This study is the first to associate brand equity with the creation of shareholder value in the context of emerging Latin American countries. In addition, the proposed method has also not been used previously to study emerging countries. The association found between a marketing asset (brand equity) and stock market performance contributes to improve the relationship between marketing and finance areas. The results of this study in emerging markets corroborate previous studies in developed markets, strongly suggesting the confirmation of the effect of brand equity on the reduction of risk stock.